Market Outlook for European and Global Markets

By Rae Wee

Global investors are eager to close out August and anticipate September, expected to initiate a long-awaited Federal Reserve easing cycle.

Asian shares increased on Friday, signaling a strong end to the month, while the dollar is set for its worst monthly performance since last November. Recent comments from Fed policymakers have suggested a rate cut could happen on September 18.

U.S. stock futures continued Wall Street’s positive momentum, with mixed futures in Europe.

The market’s recent fears of an impending U.S. recession, triggered on August 5, have since calmed down. The last trading day of the month will keep investors busy, with important data coming from the UK, Germany, and France. Key releases include UK house prices, Germany’s comprehensive data set (retail sales, unemployment, import prices), and French producer and consumer prices.

The euro zone inflation report is anticipated to show a decline in annual consumer prices to 2.2% in August from 2.6% in July. However, Germany’s preliminary inflation data, released Thursday, indicated a greater-than-expected decline, which could mean potential surprises in the wider euro zone data.

While ECB policymakers are cautious about their next move, traders expect a rate cut. Should euro zone inflation fall below expectations and with the Fed preparing to reduce rates, the ECB might be compelled to align with market easing predictions.

In the U.S., today’s release of the core personal consumption expenditures (PCE) price index, the Fed’s preferred inflation metric, highlights a week otherwise light on significant data. Focus will shift next week to the nonfarm payrolls report, crucial to assessing labor market health and influencing Fed rate decisions.

In Asia, Tokyo reported core inflation acceleration for the fourth consecutive month in August, potentially prompting the Bank of Japan to consider rate hikes.

Key Developments Influencing Markets on Friday:

• Germany retail sales, unemployment rate, and import prices
• France producer prices (July)
• UK house prices (August)
• France and euro zone CPI (August)
• Euro zone unemployment rate (July)
• US PCE price index (July)

(By Rae Wee; Editing by Edmund Klamann)